UK regulators have blocked Microsoft’s proposed $68.7 billion acquisition of the video game giant Activision.
The UK’s Competition and Markets Authority (CMA) analyzed more than 3 million Microsoft and Activision documents and more than 2,100 comments from the public about the proposed deal. The CMA decided that allowing the acquisition would “alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”
According to CMA estimates, Microsoft controls around 60-70% of the global cloud gaming services. Adding Call of Duty, Overwatch, World of Warcraft, and the upcoming Diablo IV to that umbrella would give Microsoft a “significant advantage” in the cloud gaming market. “We remain fully committed to this acquisition and will appeal,” Microsoft President Brad Smith said in a statement. “The CMA’s decision rejects a pragmatic path to address competition and investment in the United Kingdom.”
“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
In a statement to the media, Activision took a much harsher tone toward the British regulator’s decision against the Microsoft acquisition. “The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses,” says Activision spokesperson Joe Cristinat.
“We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note of that—despite all its rhetoric—the UK is clearly closed for business.”
Microsoft had hopes it could close this acquisition by July, this regulatory decision will likely impact that goal. It may need to negotiate an extension to the merger agreement while is appeals the CMA decision. If it cannot satisfy regulators, Microsoft is on the hook for $3 billion to Activision in deal-breaker fees.